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[2019] ZAFSHC 229
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Law Society of the Free State v Schroeder (4543/2018) [2019] ZAFSHC 229 (29 November 2019)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable:
NO
Of
Interest to other Judges: NO
Circulate
to Magistrates: NO
Case number:
4543/2018
In
the matter between:
THE
LAW SOCIETY OF THE FREE STATE
Applicant
and
IAN
SCHROEDER
Respondent
HEARD
ON:
28 NOVEMBER 2019
JUDGMENT
BY: DAFFUE, ADJP et
MATHEBULA, J
DELIVERED
ON: 29 NOVEMBER 2019
I
INTRODUCTION
[1]
The
applicant applies to have the respondent’s name struck off the
roll of attorneys, alternatively that he be suspended from
practice.
The application is opposed, but as will be indicated soon, counsel
for the parties conceded during oral argument
that suspension from
practice is unavoidable. The only issue that remains to be
considered is whether customary orders should
be granted such as the
appointment of a
curator
bonis
with the usual extensive powers, or respondent be afforded an
opportunity to get his financial matters in order within a designated
period whereupon the suspension could be uplifted.
II
THE PARTIES
[2]
The
application was instituted before the commencement of the Legal
Practice Act
[1]
(“the
LPA”) and therefore brought in the name of the Law Society of
the Free State, a juristic person established in
terms of s 56 of the
Attorneys Act, 53 of 1979 (“the previous Act”). The
Free State Legal Practice Council has
substituted the Law Society
although applicant failed to do a proper substitution in terms of the
Uniform Rules of Court.
Nothing turns on this. Adv DM
Grewar appeared before us on instructions of applicant’s
attorneys, Azar and Havenga.
[3]
The
respondent is Mr Ian Schroeder, an attorney admitted as such by this
court on 11 April 1996. He practised in Bethlehem,
firstly as a
sole practitioner, later as director in an incorporated company with
other attorneys and eventually as a sole director
of his own
company. This was the case until he ceased practising in March
2018. He still resides in Bethlehem.
He initially tried
to represent himself in the proceedings, but wisely decided to make
use of his erstwhile attorneys, Lovius Block,
who instructed Adv N
Snellenburg SC to appear before us.
III
HISTORY OF THE LITIGATION
[4]
The
application was already issued on 6 September 2018. A notice of
opposition was filed, but respondent’s attorneys
withdrew from
record during November 2018. If applicant was sincere in
getting finality, bearing in mind it’s allegation
that the
interests of the public might be in jeopardy, it should have acted
with much more vigour and speed.
[5]
Nothing
transpired for an extensive period of time
ex
facie
the court file until respondent filed his answering affidavit in the
beginning of August 2019. This was apparently done upon
receipt
of a notice of set down. The date stamp of the registrar
indicates that the answering affidavit was filed at court
on 23
August 2019. I presume that respondent sent his affidavit to
applicant’s attorneys by e-mail earlier as applicant’s
replying affidavit was filed on 21 August 2019. The matter, set
down for hearing on 10 October 2019, was postponed to 7 November
2019, respondent to pay the wasted costs on a punitive scale.
[6]
On
7 November 2019 respondent appeared and informed the court that Legal
Aid refused to grant legal aid to him and that he had taken
the
decision on appeal. He also explained that he had sold his
house and required time to sort out his firm’s financial
records. The matter was postponed to 28 November 2019 and costs
reserved for later adjudication.
[7]
On
28 November 2019 the matter was argued before us. We granted
respondent’s application to file a supplementary affidavit
and
also allowed Mr Grewar to present us with a letter from a Bethlehem
firm of attorneys relating to difficulties experienced
to obtain
clients’ files from respondent in matters where his mandates
had been terminated. There was no objection
to this procedure.
More about this later herein.
IV
THE UNCONTESTED EVIDENCE
[8]
The
last Fidelity Fund Certificate (“FFC”) issued to
respondent was for the year ending on 31 December 2017.
[9]
Respondent
failed to provide applicant with the required audit reports and no
FFC’s have been issued to him for the 2018 and
2019 years.
[10]
Although
it is alleged in the founding affidavit deposed to on 5 September
2018 that respondent is
“
currently
to the best of my knowledge, practising as an attorney”
,
this is denied by respondent who stated that he ceased practising in
March 2018. If he was indeed practising as an attorney
and
continues to do so, that would be a criminal offence.
[2]
Instead of challenging respondent’s uncontested evidence,
applicant’s deponent states in the replying affidavit
that this
is
“
the
first word that the Applicant received from the Respondent with
regards to him allegedly not practising as an attorney.”
This
might be so, but the fact remains that respondent’s version is
unchallenged. It would be so easy, bearing in mind
the
criminality of practising without a FFC and the interests of the
public, to obtain evidence from one or more of the applicant’s
members in Bethlehem.
V
LEGISLATION AND AUTHORITIES
[11]
Section
22(1) of the previous Act stipulates that an attorney may
“
on
application by the society concerned be struck off the roll or
suspended from practice by the court within the jurisdiction of
which
he practices –
(d)
if he or she, in the discretion of the court, is
not a fit and proper person to continue to practise as an
attorney.”
[12]
In
Chapter 4 the LPA provides in detail for disciplinary procedures
against legal practitioners accused of misconduct. The
powers
of the High Court are confirmed in s 44, but the wording of s 22 of
the previous Act is not repeated. However the
court’s
authority cannot be doubted.
[13]
The
application of s 22(1)(d) involves a threefold enquiry as explained
in
Law
Society of the Cape of Good Hope v Budricks.
[3]
In my view the same principles apply under the LPA.
[14]
The
first enquiry is aimed at determining whether the applicant has
established the offending conduct relied upon on a balance of
probabilities. Secondly, it has to be determined whether the
attorney, in the light of the misconduct proven, is not a fit
and
proper person to continue to practise as an attorney. In
considering the second requirement the court exercises a discretion
which in the words of Scott JA in
Jasat
v Natal Law Society
[4]
:
“…
involves
in reality a weighing up of the conduct complained of against the
conduct expected of an attorney and, to this extent,
a value
judgment.”
Finally, and only if it
is found that the attorney is not a fit and proper person as
mentioned, the court must decide, in the exercise
of its discretion,
whether the attorney deserves the ultimate penalty of being struck
off the roll or whether an order of suspension
from practice will
suffice.
[15]
A
Legal Practice Council applying for striking a legal practitioner off
the roll does so
custos
morum
as the guardian of morals of the legal practitioner’s
profession. It performs a public duty. I refer to the
well-known judgment in
Solomon
v The Law Society of Good Hope.
[5]
The
role can also be seen as that of a
nuntius
:
it merely places facts relating to alleged unprofessional conduct
before the court for consideration by it in order for the court
to
exercise its discretion as to the appropriateness of a sanction to be
imposed in the event of the commission of the transgression
being
established.
[6]
[16]
As
a general rule the ultimate sanction of striking off is reserved for
attorneys who have acted dishonestly whilst transgressions
that don’t
involve dishonesty are usually visited with the lesser penalty of
suspension from practice. If dishonesty
is found, the
circumstances must be exceptional before a court will order
suspension instead of striking off. In
Law
Society, Cape of Good Hope v Peter
[7]
exceptional circumstances were found.
[17]
In
Summerley
v Law Society, Northern Provinces
[8]
Brand JA made it clear that the so-called general rule referred to
supra
cannot
be regarded as a rule of the Medes and the Persians and continued as
follows:
[9]
“
The
distinction is not difficult to understand. The attorney’s
profession is an honourable profession, which demands
complete
honesty and integrity from its members. In consequence
dishonesty is generally regarded as excluding the lesser
stricture of
suspension from practice, while the same can usually not be said of
contraventions of a different kind.
[18]
It
was always regarded as trite that an attorney should make it possible
for the applicable Law Society to exercise control over
him.
The attorney must comply with the reasonable requests of the Law
Society and non-compliance warrants disciplinary action
as it
evidences that he/she is not a fit and proper person to practise as
an attorney as
inter
alia
explained in
Law
Society of the Transvaal v Tloubatla.
[10]
The principle is
mutatis
mutandis
applicable to the relationship between the LPC and legal
practitioners in the new era.
[19]
Practising
or acting as an attorney without a FFC was prohibited by s 41 of the
previous Act and it even constituted a criminal
offence in terms of s
83(10) of that Act. The corresponding sections in the LPA are
ss 84 and 93(8).
[20]
The
duties of an auditor appointed as a representative of the former
Attorneys’ Fidelity Fund in terms of the Free State Law
Society
rule 16B are well-known and do not have to be mentioned.
[21]
Rule
54 of the South African Legal Practice Council Rules
[11]
are now applicable. These Accounting Rules appear to be
stricter than the previous rules of the different Law Societies.
The relevant fund is now known as the Legal Practitioners’
Fidelity Fund.
[22]
In
order to invoke any breach of the former rule 16B or present
Accounting Rules, it is incumbent upon the applicant to show, on
a
preponderance of probabilities, that the delinquent defaulter was
practising law as an attorney at all times material to the
period of
the misconduct complained of.
VI
EVALUATION OF THE EVIDENCE IN LIGHT OF THE
LEGISLATION AND AUTHORITIES
[23]
It
cannot be found that respondent practised without a FFC, save perhaps
from January to March 2018. It is apparent from the
papers and
the manner in which applicant approached the matter, not only
relating to this respondent, but to other practitioners
as well, that
some leeway is granted to obtain FFC’s after the deadline.
[24]
It
cannot be found that respondent wilfully ignored applicant’s
letters and the instruction to attend the disciplinary hearing.
Annexures “A” to “C” of the founding
affidavit are circulars to unknown members of applicant and there
is
no indication that any of these circulars were sent to respondent.
The deponent does not state that he personally did
that. In any
event, it was not his task. Respondent denies having received
these letters and explained the circumstances
in which he found
himself at the time. His version cannot be rejected as false.
His denial has not been met in the
replying affidavit with proof of
service.
[25]
Applicant
did not prove any dishonesty or other serious misconduct that
warrants respondent’s striking off the roll.
It is not
applicant’s case that complaints from the public have been
received. Mr Grewar was intent in persuading us
to grant a
striking off order, but eventually received instructions to merely
ask for respondent’s suspension and the appointment
of a
curator
bonis
,
together with customary ancillary relief.
[26]
Respondent
cannot be allowed to practise as an attorney without a FFC and Mr
Snellenburg has correctly conceded this. He is
not a fit and
proper person to continue to practise as an attorney at this stage.
If we allow respondent to practise, we
would be condoning a criminal
offence being committed in terms of s 93(8) of the LPA. The
public’s interest must specifically
be protected.
Unfortunately, experience has taught us that in most cases of failure
to file audit reports, trust shortages,
including even serious
financial mismanagement, are encountered.
[27]
I
was initially of the view that suspension from practice should be
ordered, but instead of appointing a
curator
bonis
with the usual vast powers, respondent should be afforded time –
say four months – to get his financial records and
book-keeping
in order and to comply with all requirements of applicant, where
after he might approach the court to uplift the suspension.
However, the contents of the letter of NiemannGrobbelaar handed in
during oral argument by agreement caused me to change my mind.
Respondent has been refusing for a considerable time to hand over
clients’ files to this firm in respect of clients who had
terminated his mandate. I also acknowledge that on respondent’s
version – how doubtful that may seem –
his landlord with
whom he is involved in a legal battle, refuses him access to his
records and files. It would therefore
be impossible for
respondent to comply with any conditions of suspension on the basis
as I anticipated.
[28]
The
only option left is to issue an order suspending respondent from
practice with the usual ancillary relief granted in such instances.
If respondent is able to show that he can overcome his difficulties,
he would be entitled to approach the court to have the suspension
set
aside. If irregularities such as financial misconduct and/or
any other serious transgressions are found by the
curator
bonis
,
applicant would be entitled and obliged to approach the court again
for a striking off order.
VII
THE ORDERS
Therefore
the following orders are made:
1.
The
Respondent is suspended from practice until such a time that he
obtains his Fidelity Fund Certificates for the years 2017/2018,
2018/2019 and 2019/2020 and thereafter successfully applies to this
Court for the upliftment of his suspension.
2.
2.1
Respondent is ordered to surrender and deliver to the
Director of the Free
State Provincial Office of the South African Legal Practice Council
(‘the Director”) in Bloemfontein
his certificate of
enrolment as an attorney.
2.2
Should
Respondent fail to comply with the provisions of the preceding
sub-paragraph of this order within 2 (two) weeks from date
thereof,
the Sheriff of the district in which such certificate of enrolment is
found, is empowered and directed to take possession
thereof and
deliver same to the Director.
3.
Respondent
is ordered to deliver his books of account, records, files and
documents containing particulars and information relevant
to:
3.1
any
moneys received, held or paid by the Respondent for or on account of
any person;
3.2
any
moneys invested by the Respondent in terms of Section 86(3) and/or
Section 86(4) of the Legal Practice Act, No 28 of 2014 (hereinafter
referred to as “the Act”);
3.3
any
interest in moneys so invested, which was paid over or credited to
the Respondent;
3.4
any
estate of a deceased person, or any insolvent estate, or any estate
placed under Curatorship of which the Respondent is the
Executor,
Trustee or Curator, or which the Respondent is administering on
behalf of the Executor, Trustee or Curator of such estate;
and
3.5
the
Respondent’s practice as an attorney, to the
curator
bonis
(“Curator”) appointed in terms of paragraph 9
hereof, provided that as far as such book of account, records,
filed
and documents are concerned, the Respondent shall be entitled to have
access to them, but always subject to the supervision
of such Curator
or a nominee of such Curator.
4.
Should
the Respondent fail to comply with the provisions of the preceding
paragraph of this order within 1 (one) week after service
thereof
upon him, or after a return by a person entrusted with the service
thereof that he has been unable to effect service thereof
on the
Respondent, as the case may be, the Sheriff of the district in which
such books of account, records, files and documents
are, is empowered
to take possession thereof and deliver them to such Curator.
5.
Such
Curator shall be entitled to hand over to the persons entitled
thereto all such records, files and documents as soon as she
has
satisfied herself that the fees and disbursements in connection
therewith have been paid or satisfactorily secured or that
same are
no longer required by the Curator.
6.
A
written undertaking by a person to whom the records, files and
documents referred to in paragraph 5 above are handed, to pay such
amount as may be due to the Respondent, either on taxation or by
agreement, shall be deemed to be satisfactory security for the
purposes of the preceding paragraph hereof, provided that such
written undertaking incorporates a
domicilium
citandi et executandi
of
such person.
7.
Such
Curator is empowered to require that any such file, the contents of
which she may consider to be relevant to a claim, or possible
or
anticipated claim, against her and/or the Respondent and/or the
Respondent’s clients, and/or the Legal Practitioners’
Fidelity Fund (herein referred to as “the Fund”) in
respect of money and/or other property entrusted to the Respondent,
be re-delivered to such Curator.
8.
The
Respondent is interdicted and prohibited from operating on his trust
account(s) as defined in paragraph 9 hereof.
9.
The
Director, being Ms Tumelo Leope, or nominee, is appointed as Curator
to administer and control the trust account(s) of the Respondent,
comprising of the separate banking accounts opened and kept by the
Respondent at a bank in terms of Section 86 of the said Act
and/or
any separate savings or interest-bearing accounts as contemplated by
Section 86(3) and/or Section 86(4) of the said Act,
(including
accounts opened in accordance with the corresponding sections of the
repealed Attorneys Act, 53 of 1979) in which moneys
from such trust
banking accounts have been invested by virtue of the provisions of
the said sub-section or in which moneys in any
manner have been
deposited or credited (the said accounts being herein referred to as
“The trust account(s)”) with
the following powers and
duties:
9.1
subject
to the approval of the Board of Control of the Fund to sign and
endorse cheques and/or withdrawal forms and generally to
operate upon
the Trust account(s), but only to such extent and/or for such purpose
as may be necessary to bring to completion current
transactions in
which the Respondent was acting at the date of this order;
9.2
subject
to the approval and control of the Board of Control of the Fund to
recover and receive and, if necessary in the interest
of persons
having lawful claims against the Trust account(s) and/or against the
Respondent in respect of moneys held, received
and/or invested by the
Respondent in terms of the aforesaid Sections (hereinafter referred
to as “Trust moneys”), to
take legal proceedings which
may be necessary in respect of incomplete transactions in which the
Respondent may have been involved
and which may have been wrongfully
and unlawfully paid from the Trust account(s) and to receive such
moneys and to pay same to
the creditor of the Trust account(s);
9.3
to
ascertain from the Respondent’s book of account the names of
all persons on whose account Respondent appears to hold or
to have
received Trust moneys (hereinafter referred to as “the Trust
Creditors”) and to call upon Respondent to furnish
her within
30 (thirty) days from the date of this order, or such further period
as he may agree to in writing, with the names,
addressed of and
amounts due to all Trust Creditors;
9.4
to
call upon such Trust Creditors to furnish such proof, information and
affidavits as she may require to enable her, acting in
consultation
with and subject to the requirements of the Board of Control of the
Fund, to determine whether any such Trust Creditor
has a claim in
respect of moneys in the Trust account(s) and if so, the amount of
such claim;
9.5
to
admit or reject, in whole or in part, subject to the approval of the
Board of Control of the Fund, the claims of any such creditors,
without prejudice to such Trust Creditors’ right of access to
the Civil Courts;
9.6
having
determined the amounts which she considers are lawfully due to Trust
Creditors, to pay such claims in full, but subject always
to the
approval of the Board of Control of the Fund;
9.7
in
the event of there being any surplus in the Trust account(s) after
payment of the admitted claims of all Trust Creditors in full,
to
utilize such surplus to settle or reduce, as the case may be,
firstly, any claim of the Fund in terms of Section 86(5)(a) of
the
said Act in respect of any interest therein referred to and secondly,
without prejudice to the rights of creditors of the Respondent,
the
costs, fees and expenses referred to in this order, or such portion
thereof as has not already been separately paid by the
Respondent to
the Applicant and, if there is any balance left after payment in full
of all such claims, costs, fees and expenses,
to pay such balance,
subject to the approval of the Board of Control of the Fund, to the
Respondent. If he is solvent, or,
if the Respondent is
insolvent, to the Trustee of his insolvent estate;
9.8
in
the event of there being insufficient trust moneys in the Trust
account(s) to pay the claims of Trust Creditors reflected in
the
books of account of the Respondent in full –
9.8.1
subject
to the approval of the Board of Control of the Fund to close the
Trust account(s) and pay the credit balances to the Fund
and to
require the credit balances to be placed to the credit of a special
Trust suspense account in the name of the Respondent
in the Fund’s
books;
9.8.2
to
refer the claims of all Trust Creditors to the Board of Control of
the Fund to be dealt with in terms of the provisions of the
said Act,
and
9.8.3
to
authorise the Board of Control of the Fund to credit the credit
balances referred to in sub-paragraph 9.8.1 above to its “Paid
Claims Account” when the Fund has paid, in terms of Section 55
of the said Act admitted claims of the Trust Creditors in
excess of
such credit balances, provided that, notwithstanding the afore going,
the said Board shall be entitled in its discretion,
to transfer to
its “Paid Claims Account” the amount or amounts of any
claim or claims as and when admitted and paid
by it;
9.9
subject
to the approval of the Chairperson of the Board of Control of the
Fund to appoint nominees or representatives and/or consult
with
and/or engage the services of attorneys and/or counsel and/or
accountants and/or other persons, where considered necessary,
to
assist such Curator in the execution of the duties of the Curator,
and
9.10
to render
from time to time, as Curator, returns to the Board of Control of the
Fund, showing how the Trust account(s) have been
dealt with, until
such time as the said Board notifies him that she may regard her
duties as terminated.
10.
The
Respondent is hereby directed:
10.1
to pay the
fees and expenses of the Curator, such fees to be assessed at the
applicable rate as determined by the Board of Control
of the Fund,
including travelling time;
10.2
to pay the
reasonable fees and expenses charged by any persons consulted and/or
engaged by the Curator as aforesaid;
10.3
within 1
(one) year of him being requested to do so by the Curator, or within
such longer period as the Curator may agree to in
writing, to satisfy
the Curator, by means of the submission of taxed bills of costs, or
otherwise, of the amount of the fees and
disbursements due to the
Respondent in respect of his former practice, and should he fail to
do so, he shall not be entitled to
recover such fees and
disbursements from the Curator without prejudice, however, to such
rights, if any, as he may have against
the Trust Creditors concerned
for payment or recovery thereof.
11.
That
Respondent is hereby removed, during the period of suspension, from
office as -
11.1. executor of
any estate of which respondent has been appointed in terms of
section
54(1)(a)(v)
of the
Administration of Estates Act, No 66 of 1965
or
the estate of any other person referred to in
section 72(1)
;
11.2. curator or
guardian of any minor or other person's property in terms of
section
72(1)
read with
section 54(1)(a)(v)
and
section 85
of the
Administration of Estates Act, No 66 of 1965
;
11.3. trustee of
any insolvent estate in terms of
section 59
of the
Insolvency Act, No
24 of 1936
;
11.4. liquidator
of any company in terms of
section 379(2)
read with section 379(e) of
the Companies Act, No 61 of 1973;
11.5. trustee of
any trust in terms of section 20(1) of the Trust Property Control
Act, No 57 of 1988;
11.6. liquidator
of any close corporation appointed in terms of section 74 of the
Close Corporation Act, No 69 of 1984; and
11.7.
administrator appointed in terms of section 74 of the Magistrates'
Court Act, No 32 of 1944;
12.
Applicant
shall be entitled to re-enrol this application for removal of
Respondent’s name from the roll of practitioners should
the
Respondent not obtain his Fidelity Fund Certificates for the years
2017/2018, 2018/2019 and 2019/2020 by 30 June 2020.
13.
Respondent is ordered to pay the costs of this application, including
the costs of 7 November 2019 that stood over for later
adjudication,
on the attorney and client scale.
J.P.
DAFFUE, ADJP
I
concur
MA
MATHEBULA, J
On
behalf of applicant:
Adv. DM Grewar
Instructed
by:
AZAR & HAVENGA INC
BLOEMFONTEIN
On
behalf of respondent: Adv N
Snellenburg SC
Instructed
by:
LOVIUS BLOCK
BLOEMFONTEIN
[1]
Act 28 of 2014
[2]
S 93(8) of the LPA
[3]
2003 (2) SA 11
(SCA) at para 2
[4]
2000 (3) SA 44
(SCA) at 51E-F; See also Budricks loc cit at 14A
[5]
1934 AD 401
at
408 – 409
[6]
Hassim v
Incorporated Law Society of Natal
1977
(2) SA 757
(AD) at 767C –G
[7]
[2006] SCA 37
RSA at para 19
[8]
2006 (5) SA 631
(SCA)
[9]
Ibid at para 21
[10]
[1999] 4 All SA
59
(T) at pp 67-8
[11]
Published in GG 41781 of 20 July 2018